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Reduced Cost from Outsourcing

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Reduced Cost from Outsourcing

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Reduced Costs from Outsourcing
One of the main reasons companies will consider outsourcing is the overall reduced costs. Outsourcing provides a more efficient approach in controlling operating costs. Costs per additional employee include salary, overhead, equipment/software, training/education, other supplies, and possibly facility costs (Sood, 2005). Another cost savings quality is in overall Human Resources, as outsourcing eliminates costs for future development of employees, current trainings, recruitment, payroll and benefits. There are many markets that are able to reduce operating expense and cost of goods sold through outsourcing. Highlighted in this paper will be IT, electronics, the automobile industry, and customer services. India has had a competitive edge in the global IT market. The salary range for Indian software professionals is about fives times less than their counterparts in other developed countries. India has been able to keep a competitive edge by keeping the supply of IT professionals high. India supplies more than double the number of computer science graduates than any other country (Askari and Chatterjee, 2003). In other words, they are able to provide highly skilled, low paying IT professionals with a grasp of the English language. It is estimated, by 2008, that India will employ $77 billion dollars of the global IT market.

But as salaries in India have gradually increased, other countries have been competing with their low salaried IT professionals. According to the “Watch out, India – Outsourcing to China” article in The Economist (2006) salaries of graduates, engineers and programmers have been climbing fast and staff turnover at IT companies can reach 30-40% a year. Although not at the same rate as India, countries have been producing graduates that have been competing in the IT outsourcing market. China, Malaysia, Philippines, Singapore, Thailand, Czech Republic, Chile, Canada, and Brazil are other outsourcing...